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Nick Davies is just introducing the speakers at our event on government outsourcing: David Lidington MP, Rachel Reeves MP, Richard Cockett from the Economist and our own Tom Sasse. Thread.
We are very grateful to the sponsor to this event - WLG Gowling - currently giving an introduction and stressing why it is important that we understand what works in outsourcing as well as why.
@tom_sasse: the debate over outsourcing has often generated "more heat than light" - our report aims to inform that debate in a constructive way
@tom_sasse Since the 1970s, successive govts have expanded the role of private providers, from CCT under Thatcher and then Major, to the rise of private finance under New Labour. But has outsourcing lived up to original expectations of better value for money?
@tom_sasse @tom_sasse Our report reviews 11 different services areas to assess what the evidence says on the impact of outsourcing on cost and quality: for different services, we get a mixed picture.
@tom_sasse "Support services" such as cleaning and catering have generally improved services, whereas others - such as healthcare - show a mixed picture, whilst others still - such as probation - have been a clear failure.
@tom_sasse Although there is a somewhat mixed picture, and the efficiency gains from private provision have decreased over time, that is not to say outsourcing has not worked. In many cases, it has improved performance of both private and public providers:
@tom_sasse Where services have failed, why? For multiple reasons: the initial decision was possibly wrong, there was a lack of early market engagement, too narrow a focus on lowest-price, undue transfer of risk, or else poor contract management.
@tom_sasse How can govt improve? By choosing the right projects, and improving the way govt contracts: @tom_sasse applauds the Outsourcing Playbook created by @DLidington, the drive to strengthen commercial skills, and to improve approval processes and evidence base.
@tom_sasse @DLidington @DLidington Entering CO in Jan 2018, real problems had begun to appear in market, particularly regarding Carillion's impending demise. There was no induction, with contingency plans for services having to be drawn up straight away.
@tom_sasse @DLidington @DLidington agrees that (1) the market has to be broadened in cases where govt has a monopsony - disaggregating contracts to increase no of suppliers also requires greater contract management capability in civil service.
@tom_sasse @DLidington (2) Greater transparency should also include pilot projects - i.e. prisons had a few examples of success initially, whereas probation did not. Publication of KPIs is also key.
@tom_sasse @DLidington (3) Govt needs to be clearer about what risks it is transferring to contractor - in some cases, such as prisons, contractors were not aware of major risks - i.e. prisoners smash the windows very frequently relative to expectations.
@tom_sasse @DLidington (4) Outsourcing playbook imposes some standards that should be followed across govt: needs to be clear to all players that these are conventions to obey
(5) Need to get rid of illusory Spending Review assumptions: i.e. regarding inflation estimates, so that contract costs don't rise to the point of making contract onerous
@RachelReevesMP The mystery of Carilion was not why it collapsed, but "why it took so long". 30,000 suppliers were owed thousands, 43000 employees who lost their jobs, and £2.6bn pension liability which has since been reduced. Ofc the govt also had to pay to keep services running
@RachelReevesMP Who was responsible for its failure? In Rachel's own report, blame is placed on executives, but non-executives, auditors and regulators were all at least negligent in their treatment of the problem. The Crown Representative overseeing role for Carillion was also vacant for months
@RachelReevesMP Carillion did not grow organically, but by aggressive acquisitions: this later had impact on competitiveness of market, as smaller suppliers were swallowed up. Govt ultimately failed to ensure that there was sufficient no. of suppliers in market
@RachelReevesMP As our report discusses, suppliers were not held accountable to same standard as government: @RachelReevesMP also has strong doubts about "ethos" of suppliers - was aim to maximise value for shareholders or to serve citizens/taxpayers adequately? We need to care about ethos more.
@RachelReevesMP Govt also had standards of employment to ensure workers are paid fairly and a good pension scheme, which suppliers often lack, which also feeds into having a public service ethos.
@RachelReevesMP Transfer of risk, as our report discusses, has also been major issue: in view of @RachelReevesMP , Carillion demonstrated that some risks just can't be outsourced i.e. service failure for vulnerable users.
@RachelReevesMP New models are necessary: "social licensing" requires suppliers to sign up to set of criteria, such as living wage and paying suppliers on time, which are essential in service delivery by public or private sector.
@RachelReevesMP Whilst public sector may not have capacity to deliver all services in-house, we still need to ensure that where outsourced, suppliers live up to these standards.
@RachelReevesMP Now @CockettRichard is speaking: the age of 20% savings from outsourcing did exist, but are now over. Partly because efficiency savings have already been made, partly because public sector has become more efficient.
@RachelReevesMP @CockettRichard While outsourcing should continue, we ought to exercise more discretion over what and where we outsource: as our report shows, outsourcing works well in some areas, but can be problematic in others. This is true worldwide.
@RachelReevesMP @CockettRichard Particularly in complex services where performance cannot be measured and quality easily specified in a contract, govt should think hard about whether to outsource i.e. they did not do this in case of probation.
@RachelReevesMP @CockettRichard We also need to realise that we cannot bring all services back in-house; another effect of outsourcing was decrease in govt capacity and capability, so it is unrealistic to suggest we can insource all services.
@RachelReevesMP @CockettRichard A fourth point is how shocked we should be about lack of evidence base on outsourcing when it has been around for so long: the sector is opaque, which has unsurprisingly raised suspicions of general public and politicians. Hard to defend when we know so little about suppliers.
@RachelReevesMP @CockettRichard This is key recommendation to make suppliers more transparent - it is particularly jarring in contrast to drive across all of govt now to become more transparent to general public. @CockettRichard says suppliers agree when he has spoken to them.
@RachelReevesMP @CockettRichard Trend towards insourcing, i.e. particularly in local government for road maintenance and waste collection, is good thing: it increases competition for private suppliers, so will force them to up their game (the converse was true through the 1980s and 1990s).
@RachelReevesMP @CockettRichard @NJ_Davies asks @DLidington whether Cabinet Office can implement Playbook when current CO mandate is to deliver Brexit/prepare for No Deal? @DLidington says partially real risk, but people with interest in area, i.e. Oliver Dowden, are still there to implement.
@RachelReevesMP @CockettRichard @NJ_Davies @DLidington Audience questions(1) outsourcing of public duties and powers: how will this affect administrative justice? (2) could insourcing have an adverse impact on competitiveness of private market? (3) are we earning right lessons from private sector i.e. not to outsource core activities
@RachelReevesMP @CockettRichard @NJ_Davies @DLidington (1) @tom_sasse says issue when no appeals measures, i.e. example of PIP and benefits for disabled people, need to guarantee quality of decision-making when administrative justice is involved.
@RachelReevesMP @CockettRichard @NJ_Davies @DLidington @tom_sasse (2) @RachelReevesMP need to ask also whether to procure locally or centrally i.e. there is often value in procuring locally in places where needs best served, and on (3) suppliers often cut costs in key services, which is reason not to outsource in first place.
@RachelReevesMP @CockettRichard @NJ_Davies @DLidington @tom_sasse @CockettRichard on (2): sees it as a benefit that public competition as good thing in outsourcing - local outsourcing market not much smaller than central. On (3), agree that services involving people i.e recruitment in Army, may need kept in-house like private sector
@RachelReevesMP @CockettRichard @NJ_Davies @DLidington @tom_sasse @DLidington (1) some services, i.e. tax credits, are inherently bureaucratic, so unsure if outsourcing affects admin justice - private sector also better in providing 24/7 care to vulnerable people, so there is balance; (3) creation of equipment in Army provides counterexample!
@RachelReevesMP @CockettRichard @NJ_Davies @DLidington @tom_sasse And that is us! Having just run slightly over time, we have just finished. Thanks for everyone who has been reading/watching and especially to all our speakers for helping to make this event happen!
